Question
So I started this exercise and got to question 2 and got stumped. Could you please show all of the calculations involved step by step
So I started this exercise and got to question 2 and got stumped. Could you please show all of the calculations involved step by step so I can following along on the next exercise. Each box needs filled in. On # 3 the question ask for _______ payments _______ require entries.
Hillside issues $1,400,000 of 5%, 15-year bonds dated January 1, 2016, that pay interest semiannually on June 30 and December 31. The bonds are issued at a price of $1,713,594.
1. Prepare the January 1, 2016, journal entry to record the bonds issuance.
Date | General Journal | Debit | Credit |
Jan 01, 2016 | Cash | 1,713,594 | |
Bonds payable | 1,400,000 | ||
Premium on bonds payable | 313,594 |
2. (a) For each semiannual period, complete the table below to compute the cash payment.
Par (maturity) value | Annual Rate | Year | Semiannual cash interest payment | |||
$1,400,000 | x | 5.0% | x | 6/12 | = | $35,000 |
2. (b) For each semiannual period, complete the table below to compute the straight-line premium amortization.
Bond price | Par (maturity value) | Premium on Bonds Payable | Semiannual periods | Straight-line premium amortization | ||||
= | = |
2. (c) For each semiannual period, complete the table below to compute the bond interest expense.
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3. Complete the below table to compute the total bond interest expense to be recognized over the bonds' life.
Total bond interest expense over life of bonds: | |||
Amount repaid: | |||
payments of | |||
Par value at maturity | |||
Total repaid | 0 | ||
Less amount borrowed | |||
Total bond interest expense | $0 | ||
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4. Prepare the first two years of an amortization table using the straight-line method
Semiannual Period-End | Unamortized Premium | Carrying Value |
01/01/2016 | ||
06/30/2016 | ||
12/31/2016 | ||
06/30/2017 | ||
12/31/2017 |
5. Prepare the journal entries to record the first two interest payments.
Journal Entry Worksheet
Record the first interest payment on June 30, 2016.
Record the second interest payment on December 31, 2016.
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*Enter debits before credits
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